Forum Archive Index - September 2000

[dskul deisel <bennie64@yahoo.com>]

I totally agree that RBD is a sell at current prices.

Those trying to ramp this share should be ashamed.

It has very little upside potential.Why? Firstly the
market is capped so their sales aren't going anywhere
startling.  Secondly the pizza market has a low
barrier to entry, so RBD will be continually battling
the latest Italiano start up, or challenging
McDonalds.  Thirdly their business model requires huge
investment in upgrades, fit-outs, and competitor
acquisitions and this destroys shareholder value.

Any budding entrepreneur can set up a Dial a Dinos
operation, and so just when RBD think that their
margins are ok along comes a new entrant and sloggs
them.  Their response is to buy them out and then try
and restore their margins ( Remember when Pizza Hutt
charged $20.00 per pizza?).  This requires investment
to recover what use to be RBD's customers. The spin
from the company is that they are establishing a
platform for growth but in reality they are re
-establishing their platform.  They are simply running
up a slippery slope!

It's also true that they can't their concepts outside
NZ.  So sales are capped. They only have a market of
3.8 million.  

By owning the capital of the business they are tied to
a business model that requires high levels of capital
for reinvestment.  To release shareholder value this
company needs to adopt a different business model,
otherwise it will simply keep on turning in
lack-lusture profit results and keep repeating the
same PR lines.

Disclosure I buy the products but not the shares.


--- Mark Hubbard <mhubbard@es.co.nz> wrote:
> On 2 Sep 2000, at 17:15, rebecca bibby wrote:
> 
> 
> > P.S.  Reliable sources inform me RBD is a bargain
> so get in before others do. 
> > Emails of support strongly advised and welcomed.  
>  
> 
> 
> RBD is a great cash cow, which almost always seems
> to trade at 
> a discount to its true worth (which its currently
> doing). I suspect 
> the major trouble with it is, although it has lovely
> cashflows you 
> can bank on, its not really IMO a growth stock.
> There is not that 
> many ways it can substantially increase revenues -
> and it is a pure 
> NZ domestic operator. Thus nothing 'spectacular'
> will happen to its 
> price.
> 
> The last time I purchased it I sold half my
> shareholding at $1.64 for 
> a nice gain (treating that part like a trading
> stock). The other half I 
> have kept simply for its dividend, as its a great
> yield. Also good is 
> the dividend reinvestment plan. I'll let my
> remaining shareholding 
> just tick way, with my total shareholding rising
> with each dividend. 
> Thus, my opinion would be, its not a stock you'll
> get rich quickly on 
> by any means, but its lower risk (compared to growth
> stocks), and 
> good yield, might give good balance for a lifelong
> portfolio.
> 
> My 2 cents worth.
> 
> Cheers Mark (Taking a bit of a bath on ASX at the
> moment).
> 
> Discl:
> 
> Hold: NZSE: RBD, APT, RYM, NUF, CGB (have been
> building in 
> this).  ASX: NIX (will build when I see what price
> settles on), CSB, 
> BRZ (a big disappointment to date), UCR, and yes,
> still those WAL.
> 
>
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